How to adopt an appropriate venture out of several alternatives..??

Whenever we plan for opening up a new venture, initial study over feasibility of the projects is quite essential. In other words, project analysis is the main theme of a successful business. However, there are several capital budgeting techniques that will help you to find out the best option. Amongst all, financial analytic prefers mostly the discounted cash flow method (or Net Present Value method) of project analysis. It is an extended version of existing net cash flow approach. Here, initial cash outflow & future cash inflows are discounted with inflationary functions. Henceforth, an estimated figure of the net profit in future terms can be prescribed. Apart from NPV, now a days Internal Rare of Return also a crucial consideration in determining project viability. This approach is fixed upon a rate that will equalizes the initial cash outlay & future inflows. Accordingly, if such rate is more than the estimated discounting factor (or inflation rate) for a particular project, that project is said to have some profitability. However a project carrying highest IRR will earn higher priority. However, in present days more emphasize is placed upon NPV or more precisely Profitability Index is considered more comprehensive than IRR on account of certain limitations. Now what is Profitability Index? It is also known as benefit cost ratio. It is calculated by taking the total discounted cash flows( including inflow & outflow) divided by the initial investment. If the index shows positive, we will take up the project. Apart from all these, another vital concern in project evaluation is the pattern or trend of cash inflows. If the flows furnishes an descending order, in spite of having a good net return or greater IRR, that project should be avoided on anticipation of further decline.